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Driving Change in Energy Efficiency: A Carrot or a Stick?

Despite rapid advances in technology, we still use 16 percent more energy than we did 25 years ago. Since the 1970s we have made improvements in energy efficiency but we have added more energy consumers: lighting, air conditioning, computers, printers and data centers, etc. As a society, we have two major challenges:

1. Reduce energy use, cost and foreign energy dependency. This issue harms economies, increases inflation and creates political tension. 

2. Reduce CO2 emissions that are causing harm to the environment.

But how do we start this change? What is the best path to kick us off center and begin meaningful change in increasing energy efficiency in our buildings?

Legislation and programs can be created to change behavior, but it is important to balance rewards and punishment. If we focus only on programs that reward behavior (carrots) then there may not be enough action to create significant energy reductions. If too much legislation is created to punish poor behavior (the sticks) then driving energy efficiency could be a high cost endeavor for all of us.

The Carrots

The benefits of energy efficiency are many and well documented: lower energy bills, increased property values, improved operations efficiency. So why have less that 50 percent of building owners implemented energy conservation programs and projects into their facilities?

In many cases, investing in energy efficiency and conservation in a building makes good financial sense and creates a return that is better than the market (20 to 30 percent ROI). In these hard times, it is understandable that capital expenditure may be difficult to justify, but there are low interest loans for efficiency improvements. These loans vary by state. You can Google "low interest loan energy efficiency" along with your state name to learn more about programs for residential and commercial buildings.

Additionally, business owners should consider associated tax benefits of energy efficiency projects. The federal government and many state governments offer tax credits or rebates for implementing energy efficiency programs. These incentives reduce the payback time of energy projects and can add cash immediately to the bottom line.

Besides the simple financial benefits of an energy project, there are many more complex programs that can make these projects even more feasible.

Utilities, aggregators and demand response providers are the guardians of our electricity supply. Each day, these players delicately balance the supply and demand of energy to our homes and businesses. Miscalculations in demand can be catastrophic but the mismanagement of supply can be disastrously expensive for utilities and end users.

In many markets in the US, programs are available to financially incentivize end users to reduce their energy use in times of peak demand. Not only will an end user receive a lower utility bill, but they can receive thousands or hundreds of thousands of dollars a year for acting as a virtual power plant. Businesses need experts to guide them through this process, but can learn more at

The Sticks

The sticks that will enforce energy efficiency range from twigs to baseball bats.

As of May 2008, green building initiatives legislation, executive orders, resolutions, ordinances and policies were found in 28 states, 12 federal agencies, 78 cities, 24 counties, 19 towns and 49 educational institutions. These building codes will bring up the minimum level of energy efficiency that can be implemented in these areas.

The more painful deterrent will come in the form of legislation in the future.

Today, in Europe, all public buildings must present energy certificates to demonstrate what is being done to reduce energy use. The European Union has implemented this program in order to meet Kyoto Protocol emission reduction targets. This initiative has caused a storm of legislation, programs, initiatives and business startups. Some countries have been taken to court by the European Union for not doing enough or not acting quickly.

Another stick to force energy efficiency actions is carbon taxes. These taxes dramatically increase the final cost of energy to the end user, which will increase pain of energy costs but also decrease the payback of energy projects.

The Balance

To create change, a balance of carrots and sticks is important. Like raising a child, it is important to create an environment of discipline (restraint) that is balanced with rewards for good behavior. Here are four ideas that will help us create a balance that will maximize our progress in energy efficiency.

1. In terms of energy efficiency, end users have to feel pain to act. It is important that utility pricing is constructed so that energy costs are paid by those who use it and higher charges are passed on to those who waste it. For example, in some commercial leases tenants are charged a flat fee for energy - the tenants do not feel the pain of wasting energy and building owners can simply raise the flat rate if needed. This should be corrected so that all end users are motivated to reduce energy use.

2. We must understand that too much pain can cause confusion and market paralysis. Complex legislation and certification schemes that are being created in the world today are creating a nightmare of work, are confusing to end users of energy, and are extremely difficult to enforce. New programs should be created in incremental steps with an understanding of the time and resources needed to meet targets.

3. It's said that necessity is the mother of invention. These times of increasing energy costs and climate issues are perfect to inspire innovation. As we search for alternative energy sources and new methods to reduce our energy use, society is in a great place to reward invention in a fast and meaningful way.

4. Finally, it is important that we recognize and remove obstacles. One example of this is building codes that might block implementation of solar technology in buildings. We must keep the big picture in mind.

We have many paths available on our journey to energy efficiency. It is important to provide the right amount of motivation and restriction to ensure that we make progress on a focused and narrow road.

Brandi McManus is the global business development manager for energy services at TAC. Over the past nine years, she has worked at TAC to ensure efficient sales operations through strategic planning and proactive leadership with a focus on training and development of personnel. McManus is highly skilled in both domestic and international product development and improvements, as well as process creation and implementation.

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